Session 2010-11
Publications on the internet

To be published as HC 649-i

House of COMMONS



Justice Committee

The Work of the Legal Services Commission

Tuesday 30 November 2010

Sir Bill Callaghan, Carolyn Downs and Ruth Wayte

Evidence heard in Public Questions 1 - 78



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Oral Evidence

Taken before the Justice Committee

on Tuesday 30 November 2010

Members present:

Sir Alan Beith (Chair)

Mr Robert Buckland

Chris Evans

Mrs Helen Grant

Ben Gummer

Mr Elfyn Llwyd

Claire Perry

Yasmin Qureshi

Mrs Linda Riordan


Examination of Witnesses

Witnesses: Sir Bill Callaghan, Chair, Carolyn Downs, Chief Executive, and Ruth Wayte, Legal Director, Legal Services Commission, gave evidence.

Chair: Sir Bill, Ms Downs and Ms Wayte, welcome. We are very pleased to have you with us. We have quite a lot of things we want to ask you about. There are two things I have to do more formally before the start of the meeting. The first is to say that after consultation with the Speaker I have waived the sub judice rule, which enables us to discuss matters which are featured in some current litigation. We will not be discussing cases as such, only some of the general issues which might touch on those cases, because the delivery of public services is involved, and I am entitled to waive the rule in those circumstances.

Secondly, we have to declare interests, some of which will lead to some Members listening very carefully to what you say but not asking you any questions at all. Interests?

Mr Llwyd: I have practised family and criminal law , both as a solicitor and as a barrister , and have received public funding, but I have never been involved in any tendering processes.

Mrs Grant: I wish to declare an interest as a solicitor and also the holder of a legal aid contract, so I won’t be asking any questions today.

Yasmin Qureshi: I have been practising as a barrister of family law, and have done some immigration and quite a lot o f crime work , so I have received legal aid money i n the past and may s till receive some in the future, and I won’t be asking any questions either.

Mr Buckland: I declare an interest in that I am a practising criminal legal aid barrister and still in receipt of fees as a result of work done prior to the election. It has been many years since I practised in family legal aid-well over 10. That is my declaration.

Chair: The rest of us don’t have any relevant interests at all, other than our general non-prejudicial interest in the system working properly. I would like to welcome Mr Gummer to his first meeting of the Committee, to which he was appointed only late last night. I will ask Mr Buckland to start.

Q1 Mr Buckland: Thank you, Sir Alan. The sub judice rule has been waived, quite properly. Therefore I want to dive straight into the High Court judicial review on the family legal aid contract. Why did the LSC think it was worth resisting the application by the Law Society?

Sir Bill Callaghan: I think, to start with, we would have preferred this matter to be settled by negotiation. That would have been our starting point.

Q2 Mr Buckland: Why wasn’t it, then?

Carolyn Downs: On that point, we did enter into discussions with the Law Society, Resolution, the Legal Aid Practitioners Group and the ASA. That was probably at the beginning of August. Those discussions and negotiations, many of which were without prejudice, were seeking to resolve issues through negotiation and through a review of the outcome of the family tender provisional awards. We agreed with all other representative groups, other than the Law Society, the terms of reference for such a review to be undertaken, but unfortunately the Law Society felt that they really did wish to proceed to judicial review proceedings rather than completing a review and a negotiated outcome where we possibly could.

Q3 Mr Buckland: The LSC is not seeking to apply for permission to appeal the decision of the High Court. That is right, isn’t it?

Carolyn Downs: That’s absolutely right.

Q4 Mr Buckland: So the decision is accepted. How much has all of this cost the LSC?

Carolyn Downs: We are still negotiating costs which have been submitted to us on behalf of the Law Society. I think our own costs in relation to that-I think Ruth would know the exact figure-for our QC were in the region of about £90,000.

Ruth Wayte: Yes; it is a bit less than that. We haven’t had the final bill from the Law Society solicitors yet, but they have asked for an interim payment in the region of £200,000, which we have declined without some evidence of how that figure is amassed.

Q5 Mr Buckland: Are you able to tell us how much the whole tendering process that has now failed cost?

Ruth Wayte: It is not correct to say that the entire tendering process failed because, in fact, in 2010 the LSC tendered both criminal and civil contracts. The criminal contracts were let successfully. With the civil contracts, we have let the non-family civil contracts-about 1,000 in all-and they started on 15 November.

Q6 Mr Buckland: All right then, the family element?

Ruth Wayte: The family element, which obviously we need to have another go at, cost in the region of £1 million of project costs. That is over three years as we develop the process and includes the tender itself. In addition to that, we invested in some e-tendering software, which we will have now and for the next three years. That cost in the region of £600,000.

Q7 Mr Buckland: In accepting the decision of the High Court, would you accept their observations that the information made available to potential bidders was "opaque and misleading"?

Carolyn Downs: Our view was that, with hindsight, perhaps the information could have been clearer, as the judge said. However, we would contend-and did contend in court-that our intentions were clear in the consultation documents, particularly as the consultation documents did say that it is our intention to include that criterion, or the qualification, within the tender documents. We felt that stating that that was our intention was clear enough; clearly the judge didn’t.

Q8 Mr Buckland: Yes, because it was a dual qualification on the Law Society’s Children Panel Accreditation Scheme and the Law Society Family Law Accreditation Scheme that seemed to cause applicants quite a lot of problems.

Carolyn Downs: The issue was whether they had sufficient time to be able to become a member of the Panel. Nobody was querying-

Q9 Chair: Not having realised that it was necessary for them to do so, initially?

Carolyn Downs: Yes. We would state that it was clear, and that’s what we did put to the court-that it was clear that our intention was to include that criterion. However, in doing that, the court ruled that people did not have enough time once they realised that that was the case at the point of the publication of the tender documents.

Q10 Mr Buckland: Eight weeks.

Carolyn Downs: Yes; that they wouldn’t have had enough time to get that level of accreditation.

Sir Bill Callaghan: Can I add one point, Mr Buckland? I think it is important to recognise the context. The amount of work bid for by law firms was basically double the amount that was on offer. It was inevitable that some people would be disappointed. In other words, what happened was that the competitive criterion about Panel membership, as it were, bit in certain areas more strongly than perhaps others would have expected. The issue-and this is something we would certainly like to discuss with you-is that the "cake" the Law Society were looking for was rather larger than that which was available. However we were going to cut that, some people were going to be disappointed. That is the fundamental issue which we are wrestling with.

Q11 Chair: Isn’t that the nature of a bidding process? A number of practitioners will bid for more places than they currently have, perhaps, hoping to enlarge their involvement. Others will do so thinking that they will get only a proportion of what they ask for. That is bound to happen in a bidding process.

Sir Bill Callaghan: Indeed, but I think the Law Society were unhappy with the result that led to fewer firms being successful.

Q12 Mr Buckland: Hold on, Sir Bill. "Fewer"? The number went from 2,400 down to 1,300. Was that the aim of the LSC? I don’t think it was, was it?

Carolyn Downs: No, it wasn’t. In fact, it is really important to remember that of that large reduction in provider base, about 400 providers chose not to bid.

Q13 Mr Buckland: Can you blame them?

Carolyn Downs: Well, I don’t think-well, they chose not to bid, and therefore the reduction that came out of the bidding and the competition was significantly lower than the 1,000 that is oft quoted. So, no, we stated in our documents and in our impact assessments that we thought around 30% of the provider base would be reduced at the point of tender. If you take those 400 non-bidders out, that figure is not far off the level of reduction that we thought.

Q14 Mr Buckland: But had it gone through, it would have led to advice deserts, would it not? There was clear evidence to suggest that there were large parts of the country that would not have been provided with the services of a family legal aid lawyer.

Carolyn Downs: I don’t think that we would accept that point everywhere across the country. There are 134 or 135 procurement areas across the country, which largely map principal local authority boundaries. In all those areas the work that we did showed that the procurement plan had not been delivered in just two areas, over and above the two areas where the number of providers we had said were required for that procurement area were not forthcoming. They were Kensington and Chelsea, and Walsall.

That doesn’t mean that we weren’t concerned about coverage in, particularly, some very rural parts of the country, Cornwall being one. Interestingly, East Lancashire was another part of the country where we had some concerns. In Northumberland we had some concerns, particularly around the area of Berwick. We definitely did have concerns but largely, in the overwhelming majority of the procurement areas, we felt that the procurement plans had been met and there was sufficient provision. I think it is really important we remember that a reduction in the number of providers doesn’t necessarily mean a reduction in service.

Q15 Mr Buckland: I don’t follow. What do you mean by that?

Carolyn Downs: If you have sufficient providers in a procurement area to cover the work, that means that you do have fewer, larger providers but access to justice is not being denied. There were no reductions at all in the budget or the level of work that was being offered in any of the procurement areas. We felt that there were issues in some parts of the country. I don’t think we would necessarily use the term "advice deserts", but I absolutely understand the point that you are making. We did accept that. We really wanted to negotiate it. We would have been prepared to say, "In these areas, we have not delivered to the procurement plans; we do not think there is an acceptable level of provision in these areas," and we would go out to retender in those specific areas. Some areas actually ended up with more providers than had originally been the case, and many had a similar number, but there were some very clear areas where there were issues and we would have liked to retender in those areas.

Q16 Mr Buckland: Would you accept that the nature of some of the more complex family law cases means that a large number of parties have to be represented in proceedings, which means you do need a large number of providers and separate firms?

Carolyn Downs: Yes.

Q17 Mr Buckland: You would agree with that?

Carolyn Downs: We do, and the procurement plans covered that point.

Ruth Wayte: Yes. Each procurement plan required a minimum of five providers in any procurement area. That is based on the statistics that show that the most common number of parties funded by legal aid in public law children cases is three. We felt that would have provided sufficient cover for conflict of interest cases.

Q18 Chair: You mention the Northumberland case that I drew to your attention. I am grateful for the action that has been taken to begin a new process, but it was a recognition that, not just in relation to family law but more widely, there were areas within areas of substantial geographical size where the bidding process had, for various reasons, not delivered providers within reasonable access. Did you pick up the other cases just through your own systems identifying this, or were others like me banging on your door and saying, "This is not going to work"?

Ruth Wayte: No. We are carrying out a thorough out-turn exercise, as we are calling it, to look at the results per procurement area and per geographical area-that is, towns within a procurement area-just to check on access issues such as those you identified in Northumberland. We had already identified the difficulty, which, as you know, was due to one of the bids not being compliant with our rules because of an adverse peer review result-basically a finding of unacceptable quality.

Q19 Chair: Of a consortium partner of one of the bidders.

Ruth Wayte: On a consortium partner. What we’ve done-and this is what we’ve done previously, as well as this time round-is put in place temporary arrangements which allow Berwick CAB, in this case, to deliver the service in conjunction with one of the winning solicitor providers elsewhere in the county, who will be providing outreach services in Berwick to make sure that citizens don’t have to travel too far. In the meantime, we will retender, and that will enable the CAB, or any other tenderers that are interested, to apply.

Q20 Mr Llwyd: There is a feeling that perhaps you are not quite sensitive enough, in terms of procuring proper coverage of all areas. You have said that you are concerned about coverage. Can I just put this to you? If there were one practitioner in North Wales practising publicly funded law in a specialism, and that firm did not have the required throughput by dint of the lack of population in North Wales in comparison with other places, what would be your attitude towards granting a contract?

Ruth Wayte: We do have a number of minimum contract sizes; you are correct. I am sorry, I am not sure I heard you. Did you say "public law children" or generally?

Q21 Mr Llwyd: No, I didn’t say "children". Has the process finished? Have you awarded all the contracts in other forms of law?

Ruth Wayte: Yes.

Q22 Mr Llwyd: I will be direct, then. There is one mental health practice in North Wales who are very highly regarded. They are the only practice in North Wales and they are certainly the only practice in the upper half of Wales, if not the whole of Wales, to provide Welsh language services. Were they granted a contract by you?

Ruth Wayte: I’m afraid I can’t possibly answer that without knowing a bit more about who they are. I don’t have all that information in my head, I’m sorry. I can take a note of it and follow that up.

Q23 Mr Llwyd: I would ask you, please, to do that. I won’t put you on the spot now. I can tell you at the conclusion of this Committee precisely what I am talking about. It is of grave concern in North Wales, I can tell you.

Moving forward, can I ref er you to some of the criticism that has been made of the whole contracting process and the impact on service providers? It has been said, for example, that "Information for applications was issued six times during the tender process " and that "Key tender information and selection criteria were not available until the tender opened, thus making it more difficult for potential bidders to prepare." F urther , at all stages of the process there was difficulty because bidders were finding it difficult to prepare for tender - for example , to ensur e that key staff were available for key stages in the process; and it goes on. The CAB ha s noted several errors and so on.

The Commission, it has to be said, has previously been involved in flawed t endering processes such as the Immigration Removal C entre tender in March 2 009. Why were lessons not learned from that particular episode? Are you confident that you will learn for the future, bearing in mind what we have just been talking about?

Carolyn Downs: On the Immigration Removal Centre tender exercise in 2009, a full independent review was undertaken after that tender basically just didn’t proceed, and lessons were learned. Those lessons learned were about having specific individuals who had responsibility for leading a specific tender programme within the Commission-that was adhered to-and ensuring that if the outcome of the tender exercise was providing results which you didn’t feel met your objectives, you shouldn’t proceed, which is what happened in that case. So, yes, a full review was taken.

In relation to the current round of tenders, and particularly the family tender, we would expect again to have an independent review. Yes, we will definitely take on board-with colleagues in the Ministry of Justice, and indeed with representative bodies that we would want to be involved in that exercise and that review-the lessons from that process.

In relation to some of the issues that you’ve raised about the issuing on six occasions of information for applicants, I am aware that we did make some very minor amendments to information for applicants.

Q24 Mr Llwyd: You invite me to interject. The CAB told us in fact that questions were asked seeking clarification, and they sometimes received wrong answers. The question is: why was the information issued so many times? They were very unhappy, to such an extent that they made a point of telling us about their unhappiness. It wasn’t minor stuff, as far as they were concerned.

Ruth Wayte: I think we would be very interested to understand exactly what their concerns were, because they weren’t raised with us during the process, certainly in relation to any wrong answers on the FAQs. We work very hard with the representative bodies, and in particular Advice Services Alliance, which represents CAB and other not-for-profit providers in negotiations with us, to make sure that there was sufficient information and that we felt it was clear. The changes to the family information for applicants that you identified were partly as a result of requests from representative bodies and others. I’m not aware of any incorrect answers to FAQs, but again it is certainly something I am very happy to follow up with you in writing. We have tried our hardest to make sure that we have answered the questions correctly and appropriately.

It might be worth while considering the context of the tendering process. There were some 5,000 bids in all 14 civil categories over the summer, so there was a lot of information. Sometimes we have provided answers, grouping together a series of questions to avoid information overload. That may mean that some specifics of any particular question are not answered, but I’m not aware of any incorrect answers.

Q25 Chair: We will give you access to the CAB evidence, which will be published in the end anyway, so that you have an opportunity to answer the specific charges that they put against you.

Ruth Wayte : Thank you.

Q26 Mr Llwyd: In light of what the Chair says, I will also refer to the fact that the CAB said that there were delays at virtually every stage, and in some cases staff had been made redundant before they heard from you because of the delays.

Carolyn Downs: There were some delays to the process. I think Ruth has just explained the fact that we did have 5,000 bids. In many instances the quality of the information that we received needed some significant clarification, and therefore that did take time because we didn’t want to prejudice anybody in the process. We had to seek clarification. That did take time and therefore there were delays that arose as a result of, one, the bulk of applications and tenders that were received and, two, the clarification of information that we then needed to undertake from many of the bidders.

In terms of people being made redundant, the tenders were due to be awarded in October. With all but family, all the awards were made by July at the very latest. Therefore the instances where it would have been late were very, very few and far between. That would have been to providers who had tendered at the first round, not been awarded a contract or sufficient amount of matters and then, through verification and appeals processes, came back into the process. There will be a few instances where people were informed very late in the process because some providers, who had been given a large number of matters at the start, on verification decided that they didn’t feel they wished to undertake that level of work. That was handed back to us, and we then awarded back to the people who came next in the scoring mechanism.

Q27 Mr Llwyd: That takes me neatly to my next question. When I was at school a long time ago, one of the skills we were taught was how to prepare a précis. Why, then, were the 2010 criminal and civil contracts 273 pages long and 363 pages long? Surely it could have been simpler and it could have been shorter? If that had happened, then the problem we’ve just identified in the previous question might not have happened.

Ruth Wayte: I don’t think there is any connection, with respect, between the contractual documentation and the failure to put in wholly accurate tenders.

Q28 Mr Elfyn Llwyd: Well, your colleague thought so. You disagree with each other, I suppose, do you?

Ruth Wayte: I don’t think we do. They are entirely different documents. The contracts are prepared in conjunction with the representative bodies: in particular, the Law Society, LAPG and ASA-Advice Services Alliance, to which I referred before. We worked together on the 2010 contracts. I don’t believe they raised any concerns about the length. What we were focusing on was trying to make them as simple and straightforward as possible. It is true that we produced a single set of standard terms which apply across all of our contracts now, which means that providers who do both civil and crime only have to look at the one set of standard terms. They are also a lot shorter and simpler than the 2007 set.

What that did mean, though, is that for the specification-the rules, if you like, of how to do the legal aid work on the ground-we had to put other rules to do with civil in the civil specification, and likewise for crime. That has meant that they are a little longer, but the advantage to providers is that the rules are all in one place and readily accessible. We thought, and I think the representative bodies agreed with us, that that could only be beneficial because it should enable people to avoid making errors.

Q29 Claire Perry: Can I come in on a follow-up point? I was interested in the issue of overpayments, if you like, which has been a continual problem. Forgive me; I am no lawyer, but it seems to me to be an unbelievably unwieldy document to have to wade through in order to get a contract with you. Do you think the length of this document is somehow related to the problem of overpayment, which appears to be an issue of people being paid in error, rather than fraud? What attempts are you going to take to try and simplify the process, both to improve this process and to drive down what I believe is £30 million of overpayment running fairly consistently every year?

Carolyn Downs: Our accounts have just been laid today, and it is actually nearer £80 million.

Q30 Claire Perry: £80 million of overpayments. How linked is this unbelievable wodge of complexity that you are putting into the first stage of the contract with the overpayment problem?

Carolyn Downs: The very large majority of overpayments are a result of wrong claims and errors in the claims from providers. I think that that does absolutely relate to the complexity of the fee schemes that we have. The Ministry of Justice have made it clear in their Green Paper that they would wish to seek to simplify the legal aid process as a part of the legal aid reform programme. We will be very happily working with them to try to do that. I don’t wish to sound in any way defensive, but the graduated and fixed fee regime, which has created complexity in the whole claim and legal aid system, it should be remembered, has saved about £500 million-worth of monies. It has increased complexity, and it has without doubt increased the bureaucracy involved, but it has saved considerable monies on the legal aid fund as well.

Chair: We will be coming back to the accounts and the qualification a little later.

Q31 Ben Gummer: Could I ask a supplementary on that, which is about refugee and migrant justice? There are two points. First of all, could you give an update on where the LSC is with the casework they took on from RMJ; and also explain how it is planning to deal with those areas-my constituency is one-where RMJ provided the only legal support for asylum claimants?

Carolyn Downs: In relation to the RMJ going into administration, all the cases which were with RMJ were passed on to other providers some months ago. That was successfully transferred from the RMJ to other providers. I am sorry; I should know which constituency is yours, as you are, from today, coming to the Committee.

Q32 Ben Gummer: That’s okay. It is Ipswich.

Carolyn Downs: Ruth, do you know exactly who provides in Ipswich?

Q33 Ben Gummer: I am not asking you specifically, but are you caught up in the backlog, because my impression is that that isn’t the case?

Carolyn Downs: No.

Q34 Ben Gummer: When is the backlog likely to be cleared? Many people’s claims-many of whom have been sitting in asylum queues, for nine years in some cases-are prevented from being heard because of the problems that have been caused. Do you have a date by which point the backlog will be cleared?

Carolyn Downs: I think you are probably referring to UKBA.

Ruth Wayte: Yes; it is the Home Office. It is part of the immigration Department, rather than us.

Q35 Ben Gummer: No, no, because there are many cases which are not being heard because the RMJ case files have still not been transferred properly. I have several.

Carolyn Downs: My understanding is that absolutely every single case has been transferred, and had been transferred more than a few months ago.

Ruth Wayte: Yes, I am surprised to hear that as well.

Q36 Chair: And all the paperwork supporting it as well?

Carolyn Downs: Yes. Could I write to you on that and confirm that? That is certainly our understanding.

Ruth Wayte: In terms of cover in Ipswich, again, what we will be doing as part of the whole civil 2010 exercise is looking to see whether there are any gaps and, if so, how best we could try to fill them. Obviously, there are always difficulties in trying to get rural services, in particular, access to specialist advice, because there might not be enough clients in an area to make it worthwhile in commercial terms.

Q37 Ben Gummer: Ipswich was one, and Brighton was another. Neither are rural areas in their own right, and they also happen to be dispersal centres in some areas, so it was an unhappy coincidence. But you know of the problems yourselves and I would be interested to know where you are with it.

Carolyn Downs: On RMJ, what happened was that even though they had gone into administration we came to an arrangement with the administrators and we employed their staff, along with our staff, to work together to transfer all the files. We did put in place a large programme to ensure that people didn’t slip through the net. We will definitely write to you to confirm exactly.

Q38 Ben Gummer: Could I talk about the criminal aspect? I have a number of questions, first of all around means-testing. You will be aware of the considerable concerns that some have had about the delays caused by means-testing. Could you quantify what those delays are and what the increase caused by means-testing is? Secondly, have you established why the delays have happened precisely and, thirdly, what are you likely to do about it?

Carolyn Downs: The delays around means-testing are largely, I understand, related to Crown Court means-testing, which was introduced this year. That has been rolled out in the summer of this year. Again, it is an issue around the quality of the information. This is work undertaken by HMCS rather than ourselves. The work that they are receiving from solicitors and the claims that are being put in are not sufficiently robust. Therefore they are being passed back from HMCS to solicitors so that the eligibility documentation coming forward is more rigorous.

It is a real issue in London. I don’t think it is an issue elsewhere at the moment. It has been, but I think that’s been resolved. The refusal rate at the moment-the rate at which HMCS are sending back forms on CCMT-is about 40%, so it is a considerable amount. They have now put in additional staffing in London to address that issue. I would hope that by January we should be back on an even keel with those applications going through appropriately. It is an issue of a new system introduced this year, probably insufficient resource put in, in London in particular, and also a new system where the information that is being given is not sufficient. We have done a lot of work with the Law Society to try to resolve those issues, working with providers so the more accurate the information, the quicker the claims and the quicker the payment. That has been a good piece of work with the Law Society, the Legal Services Commission and the HMCS working together.

Q39 Ben Gummer: You were looking forward to saying that, weren’t you?

Carolyn Downs: Yes.

Q40 Ben Gummer: Can I ask again: have you been able to quantify how big the problem is, and do you have a date by which-

Carolyn Downs: Yes; it is a 40% rejection rate at the moment in London. It was 25% outside London, but that is pretty well okay now. And January. I am being pessimistic saying January; the briefing I have says probably mid-December, but given the way things are, I think it is probably better to say January.

Q41 Ben Gummer: On the issue of very high cost cases, what work have you done recently to look into what can be done to reduce the burden that they are imposing on the criminal legal aid budget?

Sir Bill Callaghan: I think they are being managed more successfully. We have seen a 30% reduction in the average cost of the very high cost cases since 2003-04. I think that is a reflection of the scrutiny that LSC staff give to these rather difficult cases. Obviously the cost of these cases often depended on a number of matters, including, for example, pages of prosecution evidence. These things are studied very, very closely indeed and a tight rein is kept, as you say, Mr Gummer, on something which is potentially very, very expensive.

Q42 Ben Gummer: Do you have any targets to reduce that figure still further? Is there any strategy that you have yourselves to see the costs coming down more?

Carolyn Downs: Off the top of my head I can’t remember the figure, but we have reduced costs over the course of the past year or so. There is now an independent panel, so where there is in any case a dispute between the solicitor and ourselves as to the costs that will be incurred, we have an independent panel of barristers and solicitors who work with us and the individual solicitor to mediate and negotiate an appropriate fee.

We are also doing benchmarking of the type of costs that we would anticipate according to different types of cases, obviously the most expensive being fraud and terrorism cases. As Sir Bill said, the reduction is a 30% reduction in very high cost cases. We haven’t been set a specific target by the Ministry of Justice for this financial year to get very high cost cases’ costs down.

Q43 Ben Gummer: But you don’t have an internal one?

Carolyn Downs: No, we don’t.

Q44 Ben Gummer: On a related issue, you are aware of the Government’s interest in, and the whole frustration of the judiciary about, plaintiffs changing their pleas at the last minute. Do you have any particular views on that which you are developing at the moment which you might want to share with us?

Sir Bill Callaghan: Perhaps I can speak also as a magistrate. Obviously I am aware of cases going to the Crown Court, and four out of five cases in the Crown Court turn out to be late guilty pleas at the door of the court. That is obviously very, very expensive. The issue is addressed in the Government’s legal aid reform paper. That is something we are giving close consideration to, but certainly, looking at the fee schemes, we want to make sure that there are no perverse incentives where people might favour that course of action.

Q45 Ben Gummer: Is it addressed sufficiently, in your view? I know it is addressed in a rather broad-brush manner, but is there anything more that you feel-

Sir Bill Callaghan: Obviously we read the consultative document when it came out not long ago, and we will be giving that and all the other proposals much further scrutiny.

Carolyn Downs: That is one that, broadly, we would definitely support because we’ve got to incentivise, through a fee regime, behaviours which reduce court time and reduce whole system costs, not just legal aid costs.

Q46 Chair: The defendant is incentivised by a discount on sentence.

Carolyn Downs: Yes.

Q47 Mr Llwyd: There is, of course, the possibility that members of my profession-I put it that way-might be urging clients to plead guilty when, strictly speaking, they should have their day in court.

Carolyn Downs: Yes, that is true.

Q48 Mr Llwyd: The perverse incentive could be there.

Carolyn Downs: Yes.

Q49 Ben Gummer: But there are also other members of the profession who know perfectly well the point at which to-you are smiling-make a plea. It always seems to fall, no matter where the rules are changed, at the point at which it is of maximum financial advantage to themselves. I am speaking here as a non-lawyer, and I am getting the evil eye, maybe. Is it possible to design a system which avoids that, or do you think that is just-

Ruth Wayte: That is what the Ministry of Justice are looking to do. They’ve set out some proposals in their consultation paper, but obviously one always has to balance that with the need to ensure that the defendant is given every proper opportunity and fair access to justice. It is about getting the tension between those two issues right.

Q50 Ben Gummer: Could I ask two further questions, please? Specifically about the Solicitor Call Centre, do you feel that it is working well? Do you feel that the bureaucracy is merited? Is it value for money, or could things be improved? You know of the Law Society’s views on the matter.

Carolyn Downs: I certainly know the CLSA’s views on the matter. I wasn’t aware of the Law Society having specific views, but I certainly knew of the Criminal Law-

Q51 Ben Gummer: Well, they think it should be scrapped.

Carolyn Downs: So does the CLSA. They are probably members of the same organisation. Again, it is important to recognise why it was brought in. It was brought in to reduce costs. It did. It was also brought in to ensure that defendants in a police station got access to advice at the very earliest opportunity, and that access to that advice was done in a transparent way so that work went to solicitors who were on a rota, effectively, who tendered for the work rather than somebody who was known, perhaps well, within a certain police station. It was undertaken to provide greater transparency; to ensure that defendants and people who had been detained got immediate and early access to advice, which it has achieved; and to reduce cost, which it has also achieved.

Q52 Claire Perry: May I ask a question on that? How much did it cost and how much have you saved as a result of introducing it?

Sir Bill Callaghan: I know we have just re-let the tender for the service. It is a new provider and that is saving, I know, £2.8 million per annum.

Q53 Claire Perry: Of what base?

Sir Bill Callaghan: My colleagues will give you the precise figure in a moment. There was some work done on the quality of the previous provider. Legal Action Group did ask a couple of leading solicitors to examine the quality of the work. I can give you a quote. This is from Mr Keogh and Mr Edwards, who reviewed a sample of files. They found that there were "some minor issues, but taking the sample as a whole, the quality" of the Defence Solicitor Call Centre "is extraordinarily high". I am quoting from that independent study.

Carolyn Downs: Just on the figures, in 2005-06, the value of work taken in police stations was £185 million, and that was 770,000 cases. In 2009-10, the value was £187 million and the volume of cases was 853,000. That does show a significant increase in the volume of work for a not dissimilar figure.

Q54 Ben Gummer: I have one further question on representation, if I can roll this together, because there are specific issues about the quality of representation for some clients, as you know, that have been brought up through the Call Centre process. If I could ask a supplementary to that, there is the well-reported concern of many members of the judiciary and many of those at the Bar about the sometimes appalling representation that defendants receive, especially in the increased use of solicitor advocates as opposed to barristers. I wonder whether you could comment on that and give me your view about whether you feel that this a trend, or whether this is something that they are unduly worried about.

Sir Bill Callaghan: The LSC has been pushing very strongly for a quality assurance scheme for advocates. In one sense we have taken up this role as a quality regulator, perhaps in the absence of action by the other regulators. I know one of my Commissioners, David Wolfe, who is a barrister, was instrumental in pushing forward this work. The QAA scheme is now, as it were, the property of the regulators-a joint group-and it was responding, as you say, Mr Gummer, to the complaints from the judiciary, and Lord Justice Thomas was a leading figure in pushing this work forward. I know there have been a lot of issues around higher court advocates, but we think the QAA scheme is the best way objectively to test quality, whether that is provided by a solicitor or by a barrister.

Q55 Mrs Riordan: Carolyn, you have mentioned that fixed fees save money. But that and the refusal to make stage payments has caused some problems and could mean that lawyers cherry-pick cases in the future, taking on the most complex or the most simple, and those in the middle not getting access to legal representation. How will you improve that situation for the future?

Carolyn Downs: I think I will have to pass that on to Ruth. Sorry, Linda.

Ruth Wayte: We are obviously alive to the problem of cherry-picking with any fixed fee system, but we were very clear with providers and the representative bodies in development of the scheme that providers had to look at the whole amount of the work and the caseload they did rather than individual cases and consider the compensation, if you like-the money-on that whole volume of work. Also, in our contracts, which as we have heard are full, we have quite a lot of provisions in them intended to safeguard against cherry-picking. What we do in order to enforce that is we will look at a sample of claims, particularly if we have some concerns, when we look at the actual costs reported against the fixed fees that we pay. We will have a look and see what is going on on the ground. If there are concerns then we would take action, which could ultimately lead to termination of the contract, although when we did a review of fixed fees, having first introduced them back in 2007, we found in the early stages that those concerns were pretty much misplaced. Generally, through provider education and representative body education, we have been able to guard against that. Certainly, we are not familiar with any particular problems to date with people being turned away.

Q56 Mrs Riordan: You are saying that people who need legal aid can access it.

Ruth Wayte: Obviously in any cash-limited system there-

Q57 Mrs Riordan: I am more concerned about the people missing out on legal advice.

Ruth Wayte: Yes, to the extent that we are funded to be able to provide it, because civil legal aid in England and Wales is subject to the money being made available, as opposed to crime, where obviously there are wider considerations for funding appropriate defendants in that case. Within the amount of the resource we have, we do our utmost to ensure that there is maximum access. In fact, as our report shows today, we have been driving up the numbers of people helped consistently, year on year, whilst maintaining the budget. Fixed fees is the mechanism that has enabled us to do that.

Q58 Mrs Riordan: Carolyn, again, you have described your relationship with the legal service providers as "adversarial". How are you working to create a more constructive relationship between the two of you?

Carolyn Downs: I think I said that before the judicial review by the Law Society. I am certainly trying very hard personally, and organisationally, to work co-operatively and collegiately with representative bodies. I think largely we do have positive relationships with representative bodies.

However, it is no secret that our relationship with the Law Society in particular is adversarial and, indeed, is litigious. We are in a process of mediation which has been instigated by the Legal Aid Practitioners Group. We are looking forward to our next session, which is next Tuesday. We are very committed, as I believe the Law Society are as well, to working through the difficulties in the relationship that we’ve had. Their Chief Executive will be present; I will be present; Sir Bill will be present; Ruth will be present; other Chairs and Chief Executives of representative bodies will be present. There is a real will to try to overcome some of the difficulties that we have undoubtedly had.

Ruth Wayte: There is also a difference between our relationship with the representative body or the provider in an adversarial context, perhaps publicly, and our private relationship. In actual fact, generally speaking, our private relationship with providers is very constructive. They often speak particularly highly of their relationship managers. Obviously, when we are in an environment of decreasing funding, there is a tension, and I think that tension will show itself publicly. Privately relations are much better.

Q59 Chair: This tension existed before this.

Ruth Wayte: Of course. It is inevitable.

Q60 Mrs Riordan: Overpayments have been mentioned before, Ruth. When is that programme of recuperating those overpayments going to be complete? Are the data that you have reliable, do you think?

Carolyn Downs: There are various data, but in terms of the data that we hold about the overpayments that have been made, and therefore the recovery that we are trying to undertake, it is reliable. In terms of the figures that are quoted in terms of the level of overpayments, it is important to understand that that is an estimated or an extrapolated figure. That is done from sampling that we undertake and the NAO verify. For example, of the figures that are quoted today and laid before Parliament of near enough £80 million-worth of errors, the actual errors that were found amounted to £48,000. It is a figure that is then extrapolated.

We have undertaken a lot of work to try to recover those monies. Our target for this financial year to recover monies is £11 million. We are on target to recover that money. I attended a session very recently with providers where we were undertaking the stewardship work. I have to say that, in the majority of instances in working with providers, where errors are found, which I think in most instances are absolutely genuine because of the complexity, there is no question about those providers being very willing to repay monies to us. Obviously every process we have at the Legal Services Commission has an appeal attached to it. We have to go through appeals to any recoveries that we make, but we will achieve our £11 million recovery this year. Some of the recoveries go back a significant time and the Parliamentary Ombudsman formally told us today that she will be investigating two recoveries that go back to 2006.

Q61 Chair: Is there a parallel underpayment problem which, if extrapolated, would produce a large figure?

Carolyn Downs: Yes. The underpayments were about £2.1 million last year. Most of those underpayments relate to eligibility-to clients who weren’t eligible anyway-so we don’t have to pay the money back. The claims were wrong; the clients weren’t eligible. The whole system does throw up some anomalies. On the testing that we are doing in this financial year, we have put a huge amount of controls in place to try to eradicate the errors before they start. What we really need to do is prevent, rather than cure. The work we are doing at the moment in one of our categories shows that we’ve got an underspend because the level of underpayment extrapolated comes out with a completely ridiculous figure. I am sure that won’t be the final figure at the end of this year. The extrapolation process depends on which files you pull out and what the value of that individual file is, and what kind of case it is, which then extrapolates to a figure. It is an estimated figure. It is round about £80 million this year, but there is no question that it is much bigger than the £48,000 which was actually found because we recovered £11 million.

Q62 Chair: The National Audit Office said that poor financial management in the LSC was related to poor financial management by the Ministry of Justice itself. What engagement and support have you had from the MoJ on this?

Carolyn Downs: As you know, I am a secondee from the MoJ.

Q63 Chair: Does that mean that you ought not to answer the question and somebody else should?

Carolyn Downs: So I am on both sides.

Q64 Chair: You should declare an interest because you are going back there.

Carolyn Downs: I don’t know about that. I am a secondee from the MoJ and my secondment was put in place precisely to provide support at a difficult time for the Legal Services Commission. Since that time, the Ministry have also seconded an interim Finance Director, and we’ve now recruited a permanent Finance Director, who was the HMCS Finance Director. On the amount of support put in by the Ministry, every time I have asked for support over the course of the last nine months I have always been given support by the Ministry. We are driving all the improvements within the Legal Services Commission-Commissioners and staff across the whole organisation. I am really pleased that the Comptroller and Auditor General recognises that improvement in his report that he has laid today, and the Ministry is supporting that.

Q65 Chair: Do you have an assessment of where you are in relation to the Financial Stewardship Plan?

Carolyn Downs: Yes. We are doing very well on the Financial Stewardship Plan. There are various elements of it. There are the recommendations that came out of the PAC hearing last year, of which there were 26 in total. We have implemented 22 of those and the other four are well on their way to being implemented. The next bit of the Financial Stewardship Plan is putting controls in place, and working in partnership with providers to eradicate the errors before they are made. That piece of work is being put in place and is very largely well received by individual providers when that is undertaken. So yes, we are doing well on our Financial Stewardship Plan, but there is a lot more to do.

Q66 Claire Perry: I think that is admirable, and clearly the overpayment problem is a rather important one. In reading the report and accounts-and I appreciate you are recently seconded to the job-the words "bonfire" and "taxpayers’ money" come to mind. It is extraordinary to me that your last Chief Executive was paid 40% more than the Prime Minister. It is interesting that you are paid 20% more than the Prime Minister of today, and in fact the pension pot of the previous Chief Executive was £1.6 million, which is £24 for every person in my constituency.

I see that you have achieved 3% reduction in your admin costs this year, but your ratio of admin costs to your legal aid budget is 5.4%, which I believe to be substantially higher than most of the quangos and in fact most of the d epartments in the public sector. What are you going to do to try and make these numbers look more reasonabl e when you become an Executive A gency as part of the MoJ? I think, frankly, this is an enormous financial bonfire burning out of control that needs to be reined in. Will you be leading that charge, or who will be taking responsibility for this programme going forward?

Sir Bill Callaghan: At the moment the Commission, which I chair, has the statutory responsibility. I would like to pay a tribute to Carolyn and her staff for the work they’ve done on the Financial Stewardship Plan. Undoubtedly the financial management had to be improved. It has been, and it is something which is a top priority. As you say, Mrs Perry, the plan is for us to become an Executive Agency. Then obviously the administration of the LSC will be subsumed into the MoJ, but this is a top priority.

I think it is also worth saying that there have been reductions in our administrative budget and reductions in staffing. That itself has led to some problems in terms of the checking that we need to do of individual law firms. These are not easy issues. I think we recognise that there have to be improvements in our financial management and improvements in our use of technology as well. These are things we take very seriously.

Q67 Claire Perry: Are you able to tell us then, Sir Bill, what the target is for when you become an Executive Agency? What will be the administrative cost or percentage when that event takes place?

Carolyn Downs: I think we have a target, which we’ve been given by the Ministry of Justice, in line with the Ministry of Justice generally for our overhead reductions, which is about a £25 million target over the CSR period. How much of that will arise purely from the move to Executive Agency status is probably more in the region of £8 million. That will be from a reduction in duplication around corporate services largely, and bringing all those corporate services to be delivered through the Ministry of Justice.

On staffing reductions generally, we are currently in the process, or about to launch tomorrow, a negotiation with staff and trade unions about a senior management reduction. We have reduced our management costs since April this year by £1 million already. That will be seeking further management reductions going forward. We are starting that negotiation process tomorrow. We have a redundancy package which we are offering at present. That has just closed to staff and we will be assessing that. We are taking very seriously indeed the need to reduce our overhead costs.

I think it is important to recognise what our staffing costs are in all of that in relation to the general fund spend. Our staffing costs, if I remember rightly, are in the region of £65 million or £66 million. Our overall costs are about twice that, so we have a very large payment that we make within that to the HMCS for work that they undertake on our behalf. That is about £15 million. If you go into our individual staffing costs they are not as high as that ratio which you quoted, which I would agree was a very high ratio. It is about half that.

Q68 Chris Evans: It was interesting that you started talking about staffing there. You mentioned that there has been a redundancy programme and you are about to enter into consultation with the unions over senior staff. You’ve come in for a bit of stick from all quarters, not least today. What is it like to work at the LSC at the moment? What is staff morale like?

Carolyn Downs: You don’t get any plaudits working for the Legal Services Commission from anybody, but given the challenges that face the organisation I have to say that staff morale is holding up tremendously well. We have, as senior managers, been round to all our sites around the whole of the country over the course of the last three months just talking through budget reductions, staffing changes, the legal aid reform programme coming forward, the judicial review and the tender exercise. I have to say that the feedback from staff has been pretty fantastic in the circumstances. My own view is that it is a pretty tough time for the public sector as a whole. We’re not bleeding hearts any more than anybody else, but you don’t get any plaudits working for the Legal Services Commission. This is the hardest job I have ever done.

Q69 Chris Evans: Would you recommend anybody working for the Legal Services Commission?

Carolyn Downs: I absolutely would recommend people working for the Legal Services Commission. It is stuffed to the rafters full of really dedicated people who are very, very committed to public service provision. So, yes, I would recommend people working for the Legal Services Commission without a doubt, but I wouldn’t work for the Legal Services Commission if you were thin-skinned.

Q70 Chris Evans: I just want to take you back. In March this year there was an independent review of the effectiveness of ministerial accountability, policy direction, legal aid and transparency of financial management. There were a number of recommendations made. It hasn’t been clear what was put in place. How many of those recommendations have been put in place and been actioned so far?

Carolyn Downs: 22 of the 26 are done, and the other four are fully under way. I think we’ve really motored considerably. As I say, I was really pleased to see that the Comptroller and Auditor General recognises that in his report today. I think we’ve really motored that as much as we possibly can.

Q71 Chris Evans: As we’ve already heard, you are going to become an Executive Agency of the Ministry of Justice. I just want to poke around a bit about the implications of that. How do you see your role changing as you move towards becoming an Executive Agency?

Sir Bill Callaghan: My role goes. If it were an Executive Agency within MoJ obviously there wouldn’t be a role for a Board. There are other issues around savings arising from shared services which will affect members of staff. But for a lot of what LSC staff do in terms of managing contracts and so on, that work will go on. They will become civil servants as part of the MoJ rather than public servants working for LSC.

Can I say, Mr Evans, I welcomed the Magee Report? A number of recommendations were addressed to me. Leaving aside perhaps the very big issue of PA, he made a number of recommendations about the governance, including moving to a smaller Board and also one that involved the Chief Executive and the Finance Director. Those recommendations have been acted upon.

Q72 Chris Evans: What I am particularly interested in is this. Do you think taking the LSC, shall we say, in-house, may have implications for the independence of the decisions made to fund litigation, especially for challenging the Government-I am plucking this out of the air-if you are prosecuting Iraq or something like that?

Sir Bill Callaghan: I think that is the key issue and that is recognised by Ministers. There are a number of ways of addressing that, including through an independent tribunal or a statutory officer. There are a number of ways in which you could guarantee independence of decision-making. I think that was recognised by the previous Administration and by the present one.

Q73 Chris Evans: But if it is part of the Government, and the Government is being prosecuted, how can there be independence? That is the tension in my own mind and I am finding that difficult to work out.

Carolyn Downs: If you have a statutory officer, the decisions of that officer cannot be interfered with politically. I think that is clear. That is the same in CICA-the Criminal Injury Compensation Authority. They have a statutory officer. The Land Registry has a statutory officer to ensure the independence of decision-making. Obviously, the Ministry, when they bring forward their Bill on legal aid reform, will need to ensure that that whole issue of independence of decision-making is properly catered for in the Bill, either through a statutory officer or through an independent tribunal.

Q74 Chris Evans: How much input are you having into the Bill?

Carolyn Downs: On those issues we are working completely co-operatively. I am the SRO for the whole programme of bringing the LSC back into the Ministry of Justice. I sit on the Board of the Ministry of Justice now.

Q75 Chris Evans: One final question: how confident are you about the future?

Carolyn Downs: It is interesting. I was at a meeting earlier on today in the Ministry and somebody said, "How far are you on the journey?" I said, "Probably about 25% of the way." We have a very, very challenging time ahead. We will be making considerable financial reductions whilst also implementing significant reforms to legal aid in an environment which is highly contested. It will be challenging, but if we are not confident and we don’t go for it we won’t do it; so we will.

Q76 Chair: That brings me to a point about the discussions taking place now. To what extent have you given advice to the Department on those areas from which the Government proposes to remove legal aid in the belief that some of them are better and more economically handled without legal representation, particularly areas of welfare, housing and employment law? Some of these are covered quite extensively by your contracts with CABs and neighbourhood law centres. You have quite a lot of the information which is relevant to how they could provide such a service in the future, but on a non-legal or paralegal basis.

Carolyn Downs: We, as officials, have worked within joint project groups led by Ministry of Justice officials and we have input into their work. We have given them very clear advice in relation to our views. That’s as officials. Clearly, as officials of the Legal Services Commission, our accountability is to the Commission and to Commissioners. MoJ officials’ accountability is directly to Ministers. As officials of the Legal Services Commission we haven’t directly given advice to Ministers. That has been done through the MoJ. Sir Bill might want to comment about the role that Commissioners have had in that process because they are appointees of the Lord Chancellor.

Q77 Chair: Sir Bill, as you know, your days in this position are numbered, as you have already described. I am sure you can feel free to tell us how you think this can be taken forward.

Sir Bill Callaghan: We obviously have met the legal aid Minister and the Secretary of State. Indeed, only last week the Secretary of State and the Minister came to the Board and we had an initial discussion on the Green Paper. The issue about the legal aid policy was obviously a very contested one, and this was brought out in the Magee review. My position has always been clear. Whatever our status, ultimately, as someone who is appointed rather than someone who is elected, it is for those who are elected to take the big decisions about the legal aid spend and about coverage and scope. I think we do have, as it were, a reservoir of experience we can draw on in terms of what is practicable. That is certainly the conversation we intend to have with the MoJ.

I have to say that some of the issues that are in the Green Paper are ones that the Commission themselves have put forward over the years. I think it was our expectation that whatever the political colour of the incoming Administration, it would want to look at public spending and it would want to look at legal aid spending. Obviously we have been discussing issues such as the role of private law family: should that be in scope? We have been looking at issues such as mediation. Although this is perhaps not formally one of the proposals in the Green Paper-and this is going back to the Carter report-we have been looking at the possibility of introducing price competition into legal aid contracts. All of these issues have been on our agenda for some time.

As you say, Sir Alan, my days are numbered and perhaps I should say-

Q78 Chair: In this room, I was going to say.

Sir Bill Callaghan: What I would be looking for, by the way, is some certainty. Obviously, it is not the happiest position to be in, particularly for our staff, and the Government having made the decision in principle, it does need primary legislation, and we would be looking for this to happen as speedily as possible. Obviously, it will need primary legislation, which I think the Government intend to do via a Bill on legal aid reforms and I think on sentencing policy as well.

Chair: Sir Bill, Ms Downs, Ms Wayte, thank you very much indeed for your help this afternoon. We will be letting you have the CAB evidence that was referred to so that you can comment on that. There were one or two other points which came up which either you’ve already said you would write to us or we would ask you more specifically to write. Thank you very much indeed.